Monday, July 27, 2009

I have learned so much from talking to people who can't pay their mortgage. They are afraid they will lose their home. They are concerned about their kids, their family, their stability. On top of that they usually have high credit card debt. Most of all, they take it personally and feel like they failed. They feel like they're not in control because of tight finances.

I always say "I've been there, we've all been their, you are not alone. You will get past this"

It is important to empathize with people and respect their feelings about their situation. Each persons' circumstance and their reaction to it are unique.

YET, how the problem is resolved is ALWAYS THE SAME.

Don't Throw Good Money After Bad!Don't Throw Good Money After Bad!Don't Throw Good Money After Bad!

Hmmm...Let me see...what's Good money after Bad.

Well, if the mortgage balance is higher than the value of the property (aka being Upside Down) or if you are spending most of your income on mortgage payments or if you neglect to pay other expenses or if you are draining your savings or retirement money...basically anything that is better investment than your mortgage payment, then making mortgage payments is throwing good money after bad. What's the primary reason to own a home. At the end of the day it's about wealth preservation and creation. Everyone buys a home in hopes that it will increase in value over time, this way we can get a return on thousands of dollars in mortgage payments, years of repairs, upgrades, taxes, insurance, and utility payments. A piece of your estate that can be passed on to your children.

THIS TIME THINGS ARE DIFFERENT. You cannot rely on the old saying "the real estate market will bounce back and prices will return". While it's true real estate markets move up and down, there is no way property prices will return to the levels we saw from 2004 to 2007. No way. This means if anyone purchased a property during 2004 to 2007, it is likely the purchase price was at the peak of the market. This scenario is not limited to purchases. Many people refinanced at the peak of the market because..well...that was the time to extract tens of thousands of dollars from a home. It was when anyone with a good credit score and a warm body could get $100,000.

Well, Peak No More. The gold rush is a bust. Everything was built on inflated appraisals and of course, greed. TheKoolAde went empty and the Band Aid became necessary. Most properties will continue to decline. It isestimated that by 2011, almost half of all mortgages will be "underwater". So don't be fooled if you hear the real estate market is getting better. It's better for people looking to buy foreclosures and cheap houses since there is a glut of property and everything is cheap.

So for those of us who took out mortgages at(whether to buy or refinance) 90% to 100% financing, option arm, adjustable, or even fixed rate, repeat after me..."My property value will never be what I(purchased or refinanced) for, and it is likely I will not have any equity.

What about credit cards with interest rates of 16%, 17%, 18%, 24%, even 30%? What about the new fees, such as membership fees and other hidden fees? Does it make sense to make these payments? Are you throwing good money after bad? Ask yourself, even with good credit, what are the chances you can get another credit card with a lower interest rate? Or ask, How come the credit card company won't lower my interest rate even though I have good credit?

So repeat after me..."I will never payoff my credit card unless the credit card company lowers my interest rate to 5% and reduces my principle".

So repeat after me..."It's so obvious the banks are doing anything they can to get cash from cash strapped consumers. Why am I surprised, it's a bank, no one owes me any favors"

There is this moral issue about being responsible for a debt after you agreed to take it on. In fact, it is a question of integrity. Essentially, once we sign on the dotted line we must stick to the deal under all circumstances.

Ask yourself, is it fair for the government, big banks, big businesses, and other power players to get a bailout. Why can't you use the same techniques banks use when they are in trouble - DEBT FORGIVENESS, LOW INTEREST LOANS, STOP MAKING LOAN PAYMENTS, TAXPAYER FUNDED GOVERNMENT BAILOUTS, in effect, A bank does not throw good money after bad.

It is your duty to protect the financial well being of yourself and your family. You do not have a moral obligation to pay a bank anything. Your obligation is only legal. It is not a crime to put your money to best use.

Friday, July 17, 2009

All too often, when a homeowner is served with foreclosure papers, they put it in the junk mail pile. In fact, homeowners pretend that it does not exist. Just a thick package of papers that will magically disappear. Sometimes, homeowners think that by talking to the bank on the phone, the foreclosure case is somehow stopped.

It's only when they receive a Notice of Sale all hell breaks loose. All of a sudden the case magically re-appears. My favorite excuse is: "We were never served any papers." I don't think so. While it's true that many foreclosure papers are not necessarily served as the law requires. For example there is a term called "gutter service", which essentially means the papers are just thrown on the ground in front of your house, in the gutter. The truth is most homeowners receive the papers in some fashion, so they have NOTICE that a foreclosure has started. It's just they choose to ignore it.

Let's get real. This blog sole purpose is to help people protect their home, protect their wealth, protect their financial future. So if there is anything that you learn from Never Sign Your Deed, its

ALWAYS RESPOND TO A FORECLOSURE ACTION IN WRITING. It is your right to defend your self. In fact, a written defense will accomplish one main objective. IT WILL SLOW THE FORECLOSURE DOWN. It is always, 100% of the time, to a homeowners advantage to slow a foreclosure case down. Why? You never know. Perhaps circumstances change that allow the homeowner to keep the property. Perhaps there is a chance to get some equity out of the property. Or the homeowner simply needs to time to get it together. What ever the reason, a written defense is mandatory.

The written defense must be mailed to the attorney who started the foreclosure. The written defense must be mailed and filed to the court where the case was started. You should consider hiring an attorney. If you can't afford an attorney, then contact a local non-profit or legal aid. If that does not work, then prepare your own answer and write yourself.

What should you say? You should say anything and everything that you feel may be wrong with the foreclosure case and may be wrong with the loan. You can contact the court where the case started to see if they have any assistance for self-represented people.

I must admit that there are some good resources on the internet. However, it is not a substitute for good legal advice.

All and all, do not sit on your ass, bite your nails, play the "if I ignore it, it doesn't exist" game.

Here are a few resources that can help you or someone you know:

If you or someone you know wants to learn more about a foreclosure, go to this link : What is Foreclosure?

If you or someone you know is feeling unsure and emotional about the situation. They need more confidence, then please read : Foreclosure Dignity

For a brief introduction on laws that are to protect property owners then review Your Rights link.

All in all, this issue fires us up. To often we speak to people who let a foreclosure case go on to the last minute. All of a sudden the homeowner is scrambling, perhaps considering filing bankruptcy, and making "under the gun" decision when...

If they read this post, they would have more control and perhaps some peace of mind.

Thursday, July 9, 2009

If you are a tenant, that happens to be living in a property in foreclosure. No need to sweat. There is a recently enacted federal law that gives tenants time to get it together and move or even stay.

If you purchase a property at a foreclosure sale or you are a lender that takes the property at a foreclosure sale and there are tenants in the property, you better start sweating.

Under the Helping Families Save Their Homes Act, a tenant has the right to stay in the property after a foreclosure sale for a minimum of 90 days. If the tenant has a lease, then THE LEASE STAYS IN EFFECT after the foreclosure sale.

Now let's review specific provisions of the relevant law under sections 701 to 704:

The law applies to a federally related mortgage loan on any dwelling or residential real property.

The new owner after foreclosure sale, which includes a lender who takes the property must give a "bona fide" tenant a 90 day notice before the tenant can be evicted.

A tenant with a "bona fide" lease entered into before the notice of foreclosure has the right to stay until the lease ends. EXCEPT that the new owner after a foreclosure sale can terminate a lease, if the new owner intends to occupy the property as his/her primary residence. This is still subject to a 90 day notice delivered to the tenant.

Section 8 Tenants are protected under this new law.

Who is a "bona fide" tenant? It is an individual or individuals that are not the prior owner of the property and are not the child, spouse or parent the prior owner.

What is a "bona fide" lease? the lease or tenancy is based upon an arms-length transaction and requires rent that is not substantially less that the fair market rent for the property, which includes any reduced rent or subsidy due to a Federal, State, or local subsidy.

This law helps tenants stay in a property after foreclosure. Most important if a tenant has a "bona fide" lease, then the tenant gets to ride it out.

So the net effect is this. No one will bid for a property at a foreclosure sale that has tenants in it. The lender will end up taking the property back. More properties on the books of lenders. Not good for lenders. Lenders are in for it now. A big positive is that lenders will have an incentive to modify a mortgage loan or strike a deal before a foreclosure sale, if the property has tenants.

I must admit, I like this law because it tips the scales towards the people and away from the lenders.